HDFC Bank — Q3 FY26 earnings call

Call held 17 Jan 2026

Management summary

HDFC Bank reported a quarter of encouraging credit growth, supported by an easing rate cycle and benign credit costs. The bank maintained rate discipline on deposits, with strong growth in core individual retail customer segments. Management expressed confidence in achieving its LDR glide path targets for FY26 and FY27, aiming for growth above the system average. Asset quality remains pristine, with specific provisions for agri non-compliance already absorbed.

Highlights

  • Credit growth buildup described as 'extremely encouraging' with a balanced approach.

  • Cost of funds decreased by 'about 10 basis points, 11 basis points or so' in the quarter.

  • LCR reported at '116' for the quarter.

  • Agri portfolio provisions of 'about 5 billion or so thereabouts' were taken and subsumed in December.

  • Per branch productivity is 'about INR305 crores' at an aggregate level.

  • Overall card spend increased '15%', with discretionary spends up '21%' year-on-year.

  • Slippages (excluding agri) were '24 BPS' in the quarter, with net of recoveries at 'about 37 basis points'.

  • Credit card contribution to total deposit momentum is in the range of '20% to 25%'.

What they filed

Q1 FY27: revenue up 3.7%, net profit up 19.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue83,002 85,040 86,779 87,372 86,994 +5%87,067 +2%87,182 +0%90,575 +4%
Net profit18,627 18,340 19,285 17,090 20,364 +9%20,691 +13%21,074 +9%20,383 +19%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Ratio

  • Loan-to-Deposit Ratio (LDR) Ratio · FY26 · High confidence 90-96%
    we said we will try and be in a range of somewhere between 90% to 96% in the year FY '26, which is what we will be is what we are very confident about.

    — Sashidhar Jagdishan, Managing Director and Chief Executive Officer

  • Loan-to-Deposit Ratio (LDR) Ratio · FY27 · High confidence 85-90%
    And then maybe by FY '27, by the natural growth and even with the growth in the way we are expecting in terms of faster growth rate, I think we should land somewhere around the 85% to 90% for FY '27.

    — Sashidhar Jagdishan, Managing Director and Chief Executive Officer

Loan Growth

  • Loan Growth vs. System Growth Loan Growth · next year (FY27) · High confidence 12-13% + couple of percentage points above system
    So our understanding as of now is next year, we expect system growth to be between 12% to 13%, when you look at nominal GDP and the credit growth that's required to support nominal GDP. So if we're talking about 12% to 13%, we are talking about a couple of percentage points above that going into the next year.

    — Kaizad Bharucha, Deputy Managing Director

Branch Expansion

  • Annual Branch Additions Branch Expansion · near future (annual) · Medium confidence 500-700 branches
    Yes. To answer in short, 5% to 7% implies 500 to 700 branches annual. I don't believe that, that kind of branch addition in the near future. We'll evaluate as we go through the annual planning process and come back at some point in time, but it would be of a good order.

    — Srinivasan Vaidyanathan, Chief Financial Officer

Risks & concerns

  • Liquidity conditions and external factors

    medium

    Availability of liquidity was impacted in the quarter, requiring open market operations and FX swaps. Future LDR movement depends on benign liquidity conditions.

    Management acknowledged

  • Competitive intensity and irrational pricing in auto/home loans

    low

    Management acknowledges 'irrational pricing' from competitors in auto and home loan products but believes it will 'play itself out' within a couple of quarters, as HDFC Bank focuses on relationship-based lending.

    Both downplayed

Q&A highlights

3 direct
LDR target for FY27 Direct
I've given you a broad range because I don't want to box myself with a narrow range. But having said that, we have been operating in a range of around the 87%, 88% in the premerger level, before the merger. And so when I say 90%, of course, I would have meant somewhere around the plus or minus in that particular range of 90%, maybe around the 88%, 89%, etcetera or it could be 90% to 91% as well.

An analyst challenged the LDR target as aggressive, prompting management to clarify the range and historical context, indicating flexibility based on market conditions.

Asked by Chintan from Autonomous

Agri portfolio non-compliance provisions Direct
Our regulatory inspection is also complete. And whatever required according to the regulatory requirement, there was about 5 billion or so thereabouts, which have been taken. In the overall context of our book and our results, if you see, they have been absorbed within that, and there is no special and we have had certain other things that were there. And so in future, we need to operate in a model that is acceptable with the regulator.

The analyst inquired about potential large provisions for agri non-compliance, and management confirmed a specific amount had already been taken and absorbed, mitigating future concerns.

Asked by Mahrukh Adajania

Underlying credit cost not decreasing Direct
One is the slippages. If you're looking at excluding agri slippages, it's 24 BPS in the quarter, prior quarter was 23 bps, prior year was 26 bps. So order of magnitude, call it, 25 basis points. That is the kind of a slippage in a quarter, right. That's what you're seeing. So not the 35 or something that you're talking about, that's one. The second thing is that credit costs also, you have to look at it, including the recoveries because when you write off certain loans as it progresses through some of the delinquency buckets, then you get it in the form of recoveries. And net of recoveries, if you see, we are at about 37 basis points or thereabouts.

The analyst questioned why credit costs weren't falling despite improving slippage, and management provided granular data on slippages and net recoveries to explain the stable trend in a growing book.

Asked by Abhishek Murarka from HSBC

2 min read

Detailed narrative

HDFC Bank concluded its Q3 FY26 with a positive outlook, as articulated during its earnings conference call on January 17, 2026, reporting on the period ending December 31, 2025. Management expressed satisfaction with the quarter's outcomes, highlighting an 'extremely encouraging' credit growth buildup across customer segments, aided by an easing rate cycle and benign credit costs. The bank's cost of funds saw a favorable reduction of 'about 10 basis points, 11 basis points or so' during the quarter, contributing to stable returns. The Liquidity Coverage Ratio (LCR) was reported at a healthy '116%'.

While specific overall revenue and profit figures for the quarter were not explicitly stated, the discussion focused on operational metrics and strategic progress. The bank confirmed absorbing 'about 5 billion or so thereabouts' in provisions related to agri portfolio non-compliance in December, indicating proactive management of regulatory requirements. Branch productivity stood at 'about INR305 crores' per branch. The bank's retail asset products, particularly cards, showed robust performance, with overall card spend up '15%' and discretionary spends growing '21%' year-on-year. Credit cards are also a significant contributor to deposit momentum, accounting for '20% to 25%' of the total deposit basket.

Looking ahead, HDFC Bank provided clear guidance on its Loan-to-Deposit Ratio (LDR), targeting a range of '90% to 96%' for FY26 and further improving to '85% to 90%' by FY27. Management is confident in outpacing system loan growth in FY27, projecting growth 'a couple of percentage points above' the expected system growth of '12% to 13%'. While the bank plans for annual branch additions in the range of '500 to 700', this will be subject to ongoing evaluation and recalibration based on market conditions and the maturity of its existing branch network.

During the Q&A, analysts probed management on the aggressive LDR targets, agri compliance provisions, and the stability of credit costs. Management addressed these directly, clarifying the LDR targets as broad ranges and confirming the absorption of agri provisions. They also explained that credit costs, with slippages (ex-agri) at '24 BPS' and net of recoveries at '37 basis points', remain stable in a growing book. Key risks acknowledged included the impact of liquidity conditions, which were managed through open market operations and FX swaps, and competitive intensity in auto and home loan segments, which management believes will normalize.

Overall, the management's tone was bullish, underpinned by high confidence in their strategic direction and ability to achieve targets. The call was characterized by strong transparency, with direct answers to most analyst questions and a high degree of data richness, providing specific numbers for various operational and performance metrics. No significant red flags were identified, reinforcing a positive outlook for HDFC Bank's future performance.

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